In the case of 6916643 Canada inc. c. Intact, compagnie d’assurances1 , in the context of an application for leave to appeal, the Court of Appeal made a pronouncement on the question of the right to an insurance indemnity for theft when in fact the loss was due to fraud.
The petitioner, 6916643 Canada Inc., had sold and handed over goods to a third party, but all it received in payment was a counterfeit certified cheque. It therefore claimed the value of the goods from its insurer, Intact, claiming to have been the victim of fraud, which can be likened to theft. Its insurance policy did indeed provide for “all risks” insurance, covering [translation] “all risks that may directly affect the insured property”, which included “merchandise, equipment and leasehold improvements.”
In first instance2, the conclusions of the judgement were that the fraud perpetrated against the plaintiff could not be considered theft and that the insurer, Intact, was not bound to pay the plaintiff an indemnity.
On appeal, although the petitioner invoked a case law controversy, the Court denied the existence of same and affirmed the judgment a quo.
In coming to this conclusion, it referred to the rationale developed in Commerce & Industry Insurance Company of Canada c. Giovanni Management inc.3, a decision dating back to 1985 in a very similar case. At that time, the Court of Appeal had held that this was not a case of physical damage as in an instance of theft, but was only a [translation] “collection loss due to subterfuge,” given that the victim had agreed to hand over the merchandise, as in the present case. This decision was followed a few times, except for two decisions from 1997 and 2015, which in no way referred to the teachings of the Court of Appeal in 1985.
As regards the petitioner, 6916643 Canada Inc., Justice Parent therefore concluded that the state of the law is as laid down in Commerce Industry. The fact that the wording of the insurance policy stipulates that [translation] “all risks that may directly affect the property” are covered, rather than “all risks of direct physical loss or damage,” as in the Commerce Industry case, cannot lead to any distinction according to the Court.
A general conclusion can therefore be drawn. When goods are obtained through a ruse and are handed over to a third party by the owner voluntarily, without the use of force or any physical damage, this cannot be considered theft as understood in the standard insurance policy for direct damage, even where there is all-risks coverage. There is no occurrence that has directly affected or damaged the property.
However, this could be qualified if the wording of the relevant policy were to deviate from the clauses that were studied in the two decisions rendered by the Court of Appeal. Indeed, although a general principle can emerge from these decisions, one must also refer to the specific wording of the applicable insurance policy in order to determine whether these principles align with the insurance coverage granted to the insured. For example, certain extensions of coverage do specifically cover the loss of property in the event of a fraudulent act or false allegations.4